Vol 13 (2016) - Issue 2

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Re Vanguard Energy Pte Ltd [2015] SGHC 156 – Litigation Funding Now Permitted in Singapore Insolvency Cases

The Singapore High Court has for the first time approved a litigation funding arrangement in an insolvency case (Re Vanguard Energy Pte Ltd [2015] SGHC 156). The court held that a liquidator was permitted to sell a cause of action, as well as any proceeds from that action, to a funder under the liquidator’s statutory powers of sale, and the doctrine of maintenance and champerty had no application to the exercise of that power. In obiter comments, the court also provided broad support for litigation funding in this context. The Judicial Commissioner, Chua Lee Ming JC, said:
'It is undeniable that litigation funding has an especially useful role to play in insolvency situations.'

Factual background
Vanguard Energy Pte Ltd (Vanguard) was placed under compulsory liquidation in November 2014 and three joint and several liquidators were appointed. Prior to the liquidation, Vanguard had filed three actions in the Singapore High Court and had also identified other potential claims. However, as the company had insufficient assets, the liquidators were unwilling to proceed with the pending or potential claims without any indemnity or funding from a third party.
Three shareholders (one of whom was also a creditor) of Vanguard agreed to provide funding for the claims and entered into a Funding Agreement with the company and the liquidators. The liquidators applied to court for approval of the Funding Agreement. Subsequently, the three shareholders agreed to provide funding under an Assignment of Proceeds Agreement (the Assignment Agreement) which, upon execution, would supersede the Funding Agreement.
The key terms of the Assignment Agreement included:

– Vanguard would provide upfront funding for 50% of the solicitor-and-client costs and any security for costs were to be provided by the company, subject to a cap of SGD 300,000 (the co-funding). The three shareholders (the Assignees) would fund the remainder of these costs, as well as party-andparty costs and other legal costs.

– After all the claims had been settled, discontinued, or had final judgment entered by the court, any amounts received by Vanguard from the claims (the Recovery) were to be paid:
• first, to Vanguard up to the amount of the co-funding;
• second, to the Assignees up to the amount funded by them; and
• third, any surplus would be paid to Vanguard.

– The liquidators would have full control of the actions except that the Assignees’ agreement was required on the choice of solicitors and on any settlement or discontinuance of any claim.

– All rights, title and interests of Vanguard and the liquidators over part of the Recovery that was equal to the funds provided by the Assignees (the Assigned Property) would be sold to the Assignees by way of assignment.

The key terms of the Assignment Agreement mirrored the terms of the Funding Agreement except that under the Assignment Agreement the Assigned Property would be sold to the Assignees. The Funding Agreement had simply contained a promise to use part of the proceeds of the claims to repay the three shareholders the amount they had funded.